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Nestle boss warns of inflation

Posted by Charles II on April 1, 2009

Richard Milne, FT:

Increased government spending through stimulus plans risks plunging the world into a new crisis and has already sparked a return of inflation, according to the chairman of Nestlé.

Peter Brabeck, one of Europe’s leading businessmen with his role as vice-chairman of Credit Suisse and L’Oréal, told the Financial Times in a video interview that the current recession would be “very deep” and “relatively long”. He added that the deficits being created by many governments meant “this crisis will go on for a long period”….

Mr Brabeck also warned that food prices would continue to rise this year as global demand increased by 3-4 per cent. He said the food crisis was “getting worse” and the poorest people “have been hurt very, very strongly” by it.

I don’t think there’s any evidence of inflation. But this is one of the arguments that will be marshaled against fiscal stimulus. Brabeck also seems to be pushing for water privatization.

5 Responses to “Nestle boss warns of inflation”

  1. We should be more concerned about deflation in the absence of stimulus spending to counteract the money disappearing from circulation due to bank non-lending.

  2. Kathy said

    Isn’t Nestle the company which sold tainted baby formula to several African countries, since Western countries rejected it?

  3. Charles said

    Nestle did have melamine contamination of baby formula, Kathy, but I don’t think Western countries were involved. You may be thinking of the Nestle boycott, a long-running campaign against Nestle based on the fact that their products, which are sold into the Third World, have a series of downsides, including:
    (a) the water added to them by the mother may be contaminated, whereas her breast milk is much safer,
    (b) breast feeding improves the baby’s immune system, whereas baby formula leaves it vulnerable, and
    (c) baby formula consumes precious cash income, which would better be spent on almost anything else, since baby formula is not necessary for the overwhelming number of mothers.

  4. As Mahakal said, deflation is the bigger worry right now. 1970s-style stagflation’s not going to happen, because the one of the main drivers of that was high oil prices. However, oil prices have dropped as demand has dropped.

  5. Charles II said

    Deflation is the bigger worry only in the short term. There is a serious resource crunch shaping up for the time when growth returns, and the United States is likely to be on the losing end of that. Oil has already rebounded to about where it was in 2005.

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